In re Adams Aircraft industries, Inc. (Wineman v Walker)

Wineman, as trustee of Industries, brought an adversarial action seeking return of severance payments made to Walker under a severance agreement and to avoid any other payments under it. The bankruptcy court denied relief except as to 90 days payments as a preference. The panel affirmed. It held that the payments could not be avoided under the insider provisions of 11 USC 548 as Walker ceased to be an insider once he was terminated, never came to the offices again and the corporate minutes reflect a resignation in lieu of termination one day after Walker was asked to reign. The panel noted this determination does not undermine the 2005 bankruptcy amendments as Industries got its benefit of the bargain in the separation agreement and should not be allowed to walk away from its obligations. The panel held the payments were not avoidable under the non-insider provisions of 548 because Industries received reasonable value in the contractually required refund of a deposit and purchase of stock for the same price Walker paid a few months prior and Industries obtained a noncompete agreement, agreement to be supportive of Industries at a time it was seeking financing and a waiver of potential claims in exchange for the separation agreement.